Home downsizing plan faces hurdles

While the downsize program in the budget has won some praise, some say the key to encouraging the elderly to downsize their home is to minimise stamp duty and estate agency fees.
Photo: Louise Kennerley

Restrictions on an initiative designed to encourage the elderly to move out of their family home are likely to dramatically limit the number of retirees who can access the scheme.

While wealth industry executives and community groups welcomed the downsizing pilot program included in the budget, they warned that some of criteria were too onerous. “Everybody agrees there is a lot of value in downsizing. This is a good starting point. It could be quite innovative," said
Michael O’Neill
, CEO of National Seniors Australia.

“But a number of the criteria are really tight," Mr O’Neill said, adding that there were several other obstacles that needed to be overcome to encourage the elderly to sell the family home.

“This does give another option. We need to look at the ways of dealing with retirees and where they live. The intention is good but the practicalities are onerous," said financial adviser Louise Biti of Strategy Steps.

As part of a package of measures aimed at tackling the ageing population, Treasurer
Wayne Swan
announced a three-year $127 million trial to help senior Australians who sell the family home in favour of a smaller dwelling retain their eligibility for the age pension.

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Retirees will be able to invest up to 80 per cent of the net gain from downsizing homes, up to a limit of $200,000, in a special account. The funds invested in the account will be exempt from the age pension means test for up to 10 years.

But the scheme will only be ­available to retirees who have owned their home for at least 25 years and the money set aside cannot be accessed.

The scheme will begin in July next year. Ms Biti said the 25-year time-frame was the biggest stumbling block, ­suggesting that five years would be more realistic.

“A lot of people haven’t lived in a house for that period of time," she said. Mr O’Neill agreed that 25 years was too long. He argued that there were other obstacles preventing the elderly from moving out of the family home, including the need to pay stamp duty and estate agency fees and the desire to stay in the same neighbourhood.

“Social adjustment is the biggest hurdle. Moving to a new area can represent huge social disruption," Mr O’Neill said.

Pilot criticised as too narrow

He also said the government should consider allowing pensioners to use the money set aside to pay for healthcare and other major costs.

The property industry criticised the program for failing to reduce stamp duty and selling fees.

It likened the pilot to the first home savers’ scheme, considered unsuccessful because of low take-up numbers and inflexible conditions.

Peter Verwer
, chief executive of the Property Council of Australia, said the pilot had too narrow a scope to be effective. “The government ignored a bond-based solution that would have increased demand and seed-funded the supply of housing for seniors," he said.

Mary Wood, executive director of the Retirement Living Council, said the program failed to capitalise on the equity it unlocked and failed to deliver new housing supply.

“This pilot program would have been a perfect opportunity to trial a financial instrument such as housing bonds to support the delivery of new affordable housing for the ageing population," she said.

Peter Bushby, president of the Real Estate Institute of Australia, said the initiative would lead to better use of existing housing stock if seniors had incentives to downsize when it suited them with a lower financial penalty.

However, he said it was unfor­tunate that stamp duty, a big impe­diment to downsizing, had again been ignored.